Are You Eligible | The Application Procedure | Looking More Needy | Grants, Scholarships and Education Loans | Tuition Loan Test


Whether you've been saving regularly or not, chances are with rising college costs, you'll need some sort of financial help when the time comes to go to college. Fortunately, there's a lot of aid money out there. Plenty for everyone. So you shouldn't let your current financial situation deter you from applying to the college of your choice­p;even if its a top Ivy League school.

Most financial aid is granted on the basis of need. In Are You Eligible we explain the requirements for receiving financial aid.

The myth is that middle to higher bracket families are not qualified to receive a lot of financial aid. Nothing could be further from the truth. All you need to do is look like you need it. We give you some suggestions how in Looking More Needy.

There are four types of financial aid:
  • Scholarships
  • Grants
  • Work-study
  • Loans

There are four main sources for financial aid:

1. College and University-administered financial aid packages.

These include independently endowed college and university scholarships, Federal Pell Grants, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal work-study FWS) and the Federal Perkin Loan Program.

2. Direct Federal aid to students and their parents.
These include FFEL Stafford Loans and PLUS loans.

3. State-funded aid.

4. Direct aid from independent sources, usually in the form of scholarships.


The federal government puts out a free booklet titled "Financial Aid from the U.S. Department of Education: the Student Guide" that gives you more details on the types of aid available and how to apply. For a copy write to

Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044-0084

Applying for financial aid is a long process that takes several months. In The Application Procedure, we explain how it works.

"Scholarships" : Lump sum given to you, usually on the basis of merit, to defer college costs. This money does not have to be repaid.

"Grants": Lump sum given to you, usually on the basis of need, to defer college costs. This money does not have to be repaid.

"Work-study": Subsidized program in which you work part-time to earn money to defer college costs.

"Loans": Moneys borrowed for education. Must be repaid, plus interest.

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Are You Eligible?

To receive financial aid from any source supported by the Federal government, you must:

1. Be a U.S. citizen or eligible non-citizen
2. Have a Social Security Number
3. Have a high school diploma or GED before you begin college
4. Sign the statements found on the Student Aid Report that will be mailed to you
5. Be enrolled as a regular student working toward a degree in an eligible program
6. Make satisfactory academic progress
7. Register with Selective Service, if required
8. Show financial need

What Do They Mean By Financial Need?
To apply for financial aid you must fill out a Free Application for Federal Student Aid (FAFSA) and Needs Analysis Form. The government then figures out your Expected Family Contribution (The amount your family is expected to pay towards your education).

To determine whether you have financial need, subtract the Expected Family Contribution from the Cost of Attending the school of your choice. If there's anything left over, you have a financial need and are eligible for financial aid.

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The Application Procedure

1. If you haven't already done it, get a Social Security Number.

2. By October or November of your senior year, you should have decided which colleges and universities you'll apply to. You'll need to enter the names of these schools on the forms you'll fill out in step 3.

3. With the exception of state and independently funded aid, applying for financial aid always starts at the same place: by filling out the Free Application for Federal Student Aid (FAFSA) and Needs Analysis Form. You can get these forms from your high school guidance counselor. If you decide to apply for state funds, you may have to fill out a special application. Check with your state's Department of Education.

As you fill out your FAFSA, make sure you apply for a Pell Grant. The application for the Grant is included in the FAFSA. You may not receive a Pell Grant, but colleges want to know you've tried this avenue of funding before you come to them.

You need to have your FAFSA and Needs Analysis Forms completed and mailed as soon after January 1st as possible, but not before January 1st. (Some schools have the capability of letting you apply by e-mail.) Different schools have different deadlines for financial aid, usually in February or March, so you should get your FAFSA and Needs Analysis Form in early. The drop dead date is May 1st.

4. In addition you may need to fill out the schools' own financial aid Form (FAA). Make sure you know the deadlines and get your applications in on time.

Always send anything that has a deadline via Certified Mail, Return Receipt Requested. That way, if there is any question, you can prove you mailed the documents on time and they received them.

5. The government looks at your FAFSA and Needs Analysis form, and using a standard formula, determines how much your family must contribute to your education. They send this information to you and to the schools to which you're applying, in a form known as a Student Aid Report (SAR). They will also forward the SAR to the local Pell Grant and state grant agencies.

6. The financial aid officers at the colleges you are applying to will review the information and decide how much of your financial need they can meet with their available financial aid.

7. You will receive a Financial Aid Award Letter telling you what the school is offering. The financial aid package you're offered may include one or more of the following elements: scholarships, grants, loans and work study.

If you have applied to several schools, wait until you receive the Financial Aid Award Letter from each of them before deciding which to attend. Some may make a better offer than others, so don't jump at the first "yes".

8. Once you've made your decision, make sure you mail your acceptance back to meet the deadline. Mail it Certified Mail, Return Receipt Required.

9. If there's still a gap between what you're offered and what you need, apply for student loan.

10. Follow the enrollment and registration procedures of the college you choose.

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Looking More Needy

When you apply for financial aid, your application will go to a financial aid officer. Financial aid officers are the people who decide how much money you'll receive.

Here's what they look at:

  • Your parents' annual income
  • Your annual income
  • Your parents' assets and savings
  • Your assets and savings

The period between January of your junior year in high school and December of your senior year is crucial. It is known as your base income year. It is the period the financial aid officer will study to determine your need. So it's important to manage your income and assets to appear needy during this year.

Here are some suggestions for how to make your income and assets appear smaller to the financial aid officer:

Your parents' annual income.
If your parents have their own business, this is the year for them to make capital investments, take any upcoming write-offs and do the other things their accountant recommends to minimize their company's profits on its books.

If your parents take home a paycheck, they have less flexibility, but there are still a few things they can do to minimize their income. They can ask their company, for example, to give them in December of your junior year any bonus they might expect to be paid in January­p;and to wait until January of your senior year to pay any bonus due the month before. That way no money from bonuses will appear in your base income year.

If their employer has a tax-deferred retirement savings program (such as a Keogh Plan) or a tax-deferred medical savings program, this is the year to fund those plans, as the amounts will not appear on their tax return, which is what financial aid officers look at. In addition, part of your parents income will automatically not count against you.

Your annual income.
The financial aid officer looks at all of your income for the base income year. Plus you're expected to put half of it away for college. So your base income year is the year to take a job at minimum wage­p;not that wonderful high-paying job you were lucky enough to find.

Also, make sure your parents have not put you on their payroll, if they own their own business. Even if it's just for tax purposes and you never see a penny of the money, it will count against you.

Your parents' assets and savings.
The forms your parents fill out will ask the value of your home. Give the lowest amount possible. Also, if your parents have more than about $50,000 in savings (including stocks and bonds), they need to move them to a place where the financial aid officer won't see them.

Your assets and savings.
Again, the financial aid officer will count all your assets and savings against you. It is your job to move your money to places where the financial aid officer can't see it, or you can expect to lose a good amount of the aid you are asking for.

Two places to move your and your parents money are tax deferred annuities and single premium life insurance policies. Both are "invisible" to financial aid officers. If you and your parents decide to move money to either of these vehicles, you need to do it before your junior year.

A few other things that can help.

  • Avoid selling anything that results in a capital gain during your base income year.
  • If your parents are anticipating a capital loss (such as a bad investment they've been thinking about liquidating), now's the time to take it.
  • If your parents are divorced, only the income of the parent you are living with counts. Even if the other parent is contributing child support or to your education, you don't have to tell the financial aid officer this information.
  • Apply to several schools, even if you have your heart set on one. Not every school looks at your financial aid application the same way. You have a better chance of getting a really great deal if you're flexible.
  • Tax Deferred Annuity. With a tax deferred annuity, your money is completely invisible to financial aid officers. In other words, it will not count against you when you are applying for financial aid. It is a savings plan with an annual payment. It has high interest rates and is tax deferred. It does; however, tie up your money and the return is low.
  • Premium Life Insurance Policy. This works just like tax deferred annuity. It protects your money and offers higher interest rates, yet it will not be counted against you when you apply for your financial aid. The policy should be taken out before you reach your junior year in high school.
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